inflation in retirement planning

How does inflation in retirement planning affect you?

Many people might experience some misunderstandings regarding inflation in retirement planning. Here at Miramontes Capital, we will address how inflation plays into your finances—and why you should put yourself on both sides of the cash register.

Inflation Overview

Inflation is a constant. It’s the product of an economy that operates on supply and demand. There are two ways inflation happens: the first, Demand-Pull Inflation, is when demand rises too quickly for a country’s production to keep up. The other is called Cost-Push Inflation, which is when things like rising wages or increased cost of materials prevent companies from producing at the same rate and price. This makes for a reduced supply and therefore an increase in overall price. Inflation is measured by economy-wide indications such as that of the Consumer Price Index (CPI), not by the rise in price of a single product or sector.

Some decades see higher inflation, but the average rate from 1913 to 2013, is 3.21%. But does that mean you just have to count on losing out on 3%, maybe more, of your hard earned, long-saved cash? Well, let’s take a look.

The Two Sides Of The Cash Register

Most people look at inflation from the point of view of the cost of living. If you are simply a consumer, if you only live on the “buying” side of the cash register, then yes, it is easy to feel abused. If you regularly buy a can of soda for 75 cents, when the price of the product eventually rises and you now have to pay 80 cents, you are at a loss of five cents.

Now, consider the consumer who also has stock in the soda company. When the price goes up, he is sharing in the profits generated by the increase. When you invest in a broad variety of sectors and companies, there is a probability that over time, your profits may double, triple, or quadruple the percentage of inflation over time. If you are invested in Apple or Samsung, when the new version of a smartphone is released and is more expensive than the last one, you share in the profits of that company in a small way, and potentially in a large way over time.

This grand yet very simple equation is much like the kind you did in grade school: when balancing equations, anything you do on one side of the equal sign needs to be done to the other. Thus, if your money is only on the consumer-side of the equation, you are off-balance. You need to make sure you are also on the other side of the cash register. Any of your investing offsets your consumer activity with “producer” activity, and in this way, inflation in retirement planning can become less of an issue for you. So as you prepare for your new beginning with retirement, you must ask yourself: What kind of lifestyle do you want to cultivate? That of the passive consumer? Or will you take steps now to take control of your finances and balance your equation?

Do what you can to get yourself on both sides of the cash register.

If you are still wondering about inflation in retirement planning, you should consider contacting a professional at Miramontes Capital to assist you.

Sid Miramontes and Miramontes Capital have helped more than 1,000 people achieve their retirement goals—and Sid’s new book catalogs that dedication to every single client in the retirement planning process. You can request your copy of the book “Retirement: Your New Beginning” by clicking here.

Schedule an in-office or over the phone consultation to discuss how Miramontes Capital can help you with your new beginning through retirement planning.


Miramontes Capital is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Miramontes Capital and its representatives are properly licensed or exempt from licensure. This website is solely for informational purposes. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Miramontes Capital unless a client service agreement is in place.